Question

Bing Book Bindery has identified two activity cost pools: printing, with an activity driver of batches processed, and binding, with an activity driver of direct labor hours. For the coming quarter, total factory overhead of $140,000 is split such that 65% is allocated to printing and 35% is allocated to binding. Bing makes two types of books: hard cover and soft cover. During the quarter, it expects to produce 5,200 hard cover books and 12,000 soft cover books. Hard covers are produced in batch sizes of 100 and soft covers are produced in batch sizes of 300. A hard cover book requires 0.75 hours of direct labor, while a soft cover book requires 0.25 hours. What is the overhead allocation to soft covers for printing

Answer 1

Bing Book Bindery

The overhead allocation to soft covers for printing is:

= $68,250.

Step-by-step explanation:

a) Data and Calculations:

Activity Cost Pools Overhead Activity Driver Number Overhead

Cost Usage Rates

Printing $91,000 Batches processed 400 $227.50

Binding $49,000 Direct labor hours 150 $326.67

Total $140,000

Overhead rates:

Printing = $227.50 ($91,000/400)

Binding = $326.67 ($49,000/150)

Hard Cover Soft Cover Total

Units produced 5,200 12,000 17,200

Batches 100 300 400

Direct labor hours 0.75 0.25

Total direct labor hours 75 (0.75*100) 75 (0.25*300) 150

Overhead allocated to Soft Cover:

Printing = ($227.50 * 300) $68,250

Binding = ($326.67 * 75) 24,500

Total overhead = $92,750

Overhead allocated to Harc Cover:

Printing = ($227.50 * 100) $22,750

Binding = ($326.67 * 75) 24,500

Total overhead = $47,250